Power giants urge Brown to cut stamp duty on 'green' homes

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Gordon Brown is being urged to reduce stamp duty on energy-efficient homes to help the Government meet its targets for cutting emissions of greenhouse gases.

The proposal has been put to the Chancellor by a number of large energy companies, led by Powergen, as a means of encouraging greater energy saving and tackling the threat of global warming.

Improved energy efficiency in the home is one of the biggest potential contributors to cutting UK emissions of greenhouse gases. The Government has set a target of reducing emissions of carbon dioxide by between 15 million and 25 million tonnes by 2020 and believes at least 4 million of this could come from a reduction in home energy use. Ministers believe the best way of encouraging this is to promote the savings in household gas and electricity bills that can be achieved through energy-efficiency measures. A pilot scheme begins today under which energy suppliers will be allowed to switch up to one million customers on to long-term contracts in return for installing energy-saving devices in their homes. Reductions in bills of up to 15 per cent could be achieved, according to the industry regulator Ofgem.

Industry executives believe, however, that a better way of achieving the targets is to give householders a direct tax incentive, either through a discount on stamp duty when a house comes to be sold or other tax breaks. They are concerned that the savings, in themselves, will be too small to encourage a widespread switch to energy-efficient measures.

Paul Golby, the chief executive of Powergen, said: "The problem with offering people savings on their bills in return for being more energy efficient is that they simply turn the thermostat up instead and get more central heating for the same amount of money."

ScottishPower's chief executive Ian Russell has also been in the forefront of attempts to persuade the Chancellor that tax breaks are the best way of promoting energy efficiency. There was heavy lobbying of the Treasury before the last Budget but to no avail.

Industry executives concede that stamp duty is easy to collect and varying it according to the energy efficiency of a house would add a layer of complexity.